Substantial Acquisition of Shares or Voting Rights in and Acquisition of
Control Over a Listed Company -Part: III

General Obligations of the acquirer ( Regulation 22 )

1. The public announcement of offer to acquire the shares of the target company shall be made only when the acquirer is able to implement the offer.

2. Within 14 days of the public announcement of the offer, the acquirer shall send a copy of the draft letter of offer to the target company at its registered office address, for being placed before the board of directors and to all the stock exchanges where the shares of the company are listed

3. The acquirer shall ensure that the letter of offer is sent to all the shareholders (including non-resident Indians) of the target company, whose names appear on the register of members of the company as on the specified date mentioned in the public announcement, so as to reach them within 45 days from the date of public announcement.

   Provided that where the public announcement is made pursuant to an agreement to acquire shares or control over the target company, the letter of offer shall be sent to shareholders other than the parties to the agreement.

   Explanation:-

   1. A copy of the letter of offer shall also be sent to the Custodians of Global Depository Receipts or American Depository Receipts to enable such persons to participate in the open offer, if they are entitled to do so.

   2. A copy of the letter of offer shall also be sent to warrant holders or convertible debenture holders, where the period of exercise of option or conversion falls within the offer period.

4. The date of opening of the offer shall be not later than the sixtieth day from the date of public announcement

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5. The offer to acquire shares from the shareholders shall remain open for a period of 30 days

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5. A)  The shareholder shall have the option to withdraw acceptance tendered by him upto three working days prior to the date of closure of the offer.

6. In case the acquirer is a company, the public announcement of offer, brochure, circular, letter of offer or any other advertisement or publicity material issued to shareholders in connection with the offer must state that the directors accept the responsibility for the information contained in such documents.

   Provided that if any of the directors desires to exempt himself from responsibility for the information in such document, such director shall issue a statement to that effect, together with reasons thereof for such statement.

7. During the offer period, the acquirer or persons acting in concert with him shall not be entitled to be appointed on the board of directors of the target company.

   Provided that in case of acquisition of shares or voting rights or control of a Public Sector Undertaking pursuant to a public announcement made under the proviso to sub-regulation (1) of Regulation 14, the provisions of sub-regulation (8) of Regulation 23 shall be applicable

   Provided further that where the acquirer, other than the acquirer who has made an offer under regulation 21 A, after assuming full acceptances, has deposited in the escrow account hundred per cent. of the consideration payable in cash where the consideration payable is in cash and in the form of securities where the consideration payable is by way of issue, exchange or transfer of securities or combination thereof, he may be entitled to be appointed on the Board of Directors of the target company after a period of twenty one days from the date of public announcement.

8. Where an offer is made conditional upon minimum level of acceptances, the acquirer or any person acting in concert with him

   1. shall, irrespective of whether or not the offer received response to the minimum level of acceptances, acquire shares from the public to the extent of the minimum percentage specified in sub-regulation (1) of Regulation 21

      Provided that the provisions of this clause shall not be applicable in case the acquirer has deposited in the escrow account, in cash, 50% of the consideration payable under the public offer.

   2. shall not acquire, during the offer period, any shares in the target company, except by way of fresh issue of shares of the target company, as provided for under Regulation 3;

   3. shall be liable for penalty of forfeiture of entire escrow amount, for the non-fulfilment of obligations under the Regulations;

9. If any of the persons representing or having interest in the acquirer is already a director on the board of the target company or is an "insider" within the meaning of Securities and Exchange Board of India (Insider Trading) Regulations, 1992, he shall withdraw himself and not participate in any matter(s) concerning or 'relating' to the offer including any preparatory steps leading to the offer.

10. On or before the date of issue of public announcement of offer, the acquirer shall create an escrow account as provided under Regulation 28.

11. The acquirer shall ensure that firm financial arrangements has been made for fulfilling the obligations under the public offer and suitable disclosures in this regard shall be made in the public announcement of offer.

12. The acquirer shall, within a period of 30 days from the date of the closure of the offer, complete all procedures relating to the offer including payment of consideration to the shareholders who have accepted the offer and for the purpose open a special account as provided under Regulation 29.

    Provided that where the acquirer is unable to make the payment to the shareholders who have accepted the offer before the said period of 30 days due to non-receipt of requisite statutory approvals, the Board may, if satisfied that non-receipt of requisite statutory approvals was not due to any willful default or neglect of the acquirer or failure of the acquirer to diligently pursue the applications for such approvals, grant extension of time for the purpose, subject to the acquirer agreeing to pay interest to the shareholders for delay beyond 30 days, as may be specified by the Board from time to time.

13. Where the acquirer fails to obtain the requisite statutory approvals in time on account of willful default or neglect or inaction or non-action on his part, the amount lying in the escrow account shall be liable to be forfeited and dealt with in the manner provided in clause (e) of sub regulation 12 of Regulation 28, apart from the acquirer being liable for penalty as provided in the Regulations.

14. In the event of withdrawal of offer in terms of the Regulations, the acquirer shall not make any offer for acquisition of shares of the target company for a period of six months from the date of public announcement of withdrawal of offer.

15. In the event of non-fulfillment of obligations under Chapter III or Chapter IV of the Regulations, the acquirer shall not make any offer for acquisition of shares of any listed company for a period of twelve months from the date of closure of offer.

16. If the acquirer, in pursuance to an agreement, acquires shares which along with his existing holding, if any, increases his share holding beyond 15%, then such an agreement for sale of shares shall contain a clause to the effect that in ca se of non-compliance of any provisions of this regulation, the agreement for such sale shall not be acted upon by the seller or the acquirer.

    Provided that in case of acquisition of shares of a Public Sector Undertaking pursuant to a public announcement made under the Regulations, the provisions of sub-regulation (8) of Regulation 23 shall be applicable

17. Where the acquirer or persons acting in concert with him has acquired any shares in terms of sub-regulation (7) of regulation 20 at a price equal to or less or more than the offer price, he shall disclose the number, percentage, price and the mode of acquisition of such shares to the stock exchanges on which the shares of the target company are listed and to the merchant banker within 24 hours of such acquisition and the stock exchanges shall forthwith disseminate such information to the public.]

18. Where the acquirer has not either, in the public announcement, and, or in the letter of offer, stated his intention to dispose of or otherwise encumber any assets of the target company except in the ordinary course of business of the target company, the acquirer, where he has acquired control over the target company, shall be debarred from disposing of or otherwise encumbering the assets of the target company for a period of 2 years from the date of closure of the public offer

19. The acquirer and the persons acting in concert with him shall be jointly and severally responsible for fulfillment of obligations under these Regulations.]

1. Unless the approval of the general body of shareholders is obtained after the date of the public announcement of offer, the board of directors of the target company shall not, during the offer period, -

   1. sell, transfer, encumber or otherwise dispose of or enter into an agreement for sale, transfer, encumbrance or for disposal of assets otherwise, not being sale or disposal of assets in the ordinary course of business, of the company or its subsidiaries; or

   2. issue or allot any authorised but unissued securities carrying voting rights during the offer period; or

   3. enter into any material contracts.

   Explanation :- Restriction on issue of securities under clause (b) of sub-regulation (1) shall not affect -

   1. the right of the target company to issue or allot shares carrying voting rights upon conversion of debentures already issued or upon exercise of option against warrants, as per pre-determined terms of conversion or exercise of option.

   2. issue or allotment of shares pursuant to public or rights issue in respect of which the offer document has already been filed with the Registrar of Companies or Stock Exchanges, as the case may be.

2. The target company shall furnish to the acquirer, within 7 days of the request of the acquirer or within 7 days from the specified date, whichever is later, a list of shareholders or warrant holders or convertible debenture holders as are eligible for participation under Explanation (ii) to sub-regulation (3) of Regulation 22 containing names, addresses, shareholding and folio number, and of those persons whose applications for registration of transfer of share s are pending with the company.

3. Once the public announcement has been made, the board of directors of the target company shall not, -

   1. appoint as additional director or fill in any casual vacancy on the board of directors, by any person(s) representing or having interest in the acquirer, till the date of certification by the merchant banker as provided under sub-regulation (6) below.

      Provided that upon closure of the offer and the full amount of consideration payable to the shareholders being deposited in the special account, changes as would give the acquirer representation on the Board or control over the company, c an be made by the target company.

   2. allow any person or persons representing or having interest in the acquirer, if he is already a director on the board of the target company before the date of the public announcement, to participate in any matter relating to the offer, including any preparatory steps leading thereto.

4. The board of directors of the target company may, if they so desire, send their unbiased comments and recommendations on the offer(s) to the shareholders, keeping in mind the fiduciary responsibility of the directors to the shareholders an d for the purpose seek the opinion of an independent merchant banker or a Committee of Independent Directors; Provided that for any misstatement or for concealment of material information, the directors shall be liable for action in terms of these Regulations and the Act.

5. The board of directors of the target company shall facilitate the acquirer in verification of securities tendered for acceptances.

6. Upon fulfillment of all obligations by the acquirers under the Regulations as certified by the merchant banker, the board of directors of the target company shall transfer the securities acquired by the acquirer, whether under the agreement or from open market purchases, in the name of the acquirer and, or allow such changes in the board of directors as would give the acquirer representation on the board or control over the company.

7. The obligations provided for in sub-regulation (16) of regulation 22 shall be complied with by the company in the circumstances specified therein.

8. The restrictions-

   1. for appointment of directors on the Board of a target company by the acquirer under sub-regulation (7) of Regulation 22.

   2. for acting on agreement for under sub-regulation (16) of Regulation 22;

   3. for appointment of directors by the target company under clause (a) of sub-regulation 3 of this Regulation; and

   4. for on transfer of securities or changes in the Board of Directors of the target company under sub-regulation (6) of this Regulation, shall not be applicable, in case of sale of shares of a Public Sector Undertaking by the Central Government or the State Government, and the agreement to sell contains a clause to the effect that in case of non-compliance of any of the provisions of the Regulations by the acquirer, transfer of shares or change of management or control of Public Sector Undertaking shall vest back with the Central Government or the State Government and the acquirer shall be liable to such penalty as may be imposed by the Central Government or the State Government

1. Before the public announcement of offer is made, the merchant banker shall ensure that-

   1. the acquirer is able to implement the offer;

   2. the provision relating to escrow account referred to in Regulation 28 has been made;

   3. firm arrangements for funds and money for payment through verifiable means to fulfil the obligations under the offer are in place;

   4. the public announcement of offer is made in terms of the Regulations.

2. The merchant banker shall furnish to the Board a due diligence certificate which shall accompany the draft letter of offer

3. The merchant banker shall ensure that the 72[*] public announcement and the letter of offer is filed with the Board, target company and also sent to all the stock exchanges on which the shares of the target company are listed in accordance with the Regulations.

4. The merchant banker shall ensure that the contents of the public announcement of offer as well as the letter of offer are true, fair and adequate and based on reliable sources, quoting the source wherever necessary.

5. The merchant banker shall ensure compliance of the Regulations and any other laws or rules as may be applicable in this regard.

6. Upon fulfillment of all obligations by the acquirers under the Regulations, the merchant banker shall cause the bank with whom the escrow amount has been deposited to release the balance amount to the acquirers.

7. The merchant banker shall send a final report to the Board within 45 days from the date of closure of the offer.